Dog Days

Dollar signs post to a rough summer

Santa Fe’s economy this summer—who gets hired, who stays in business, who moves back in with their parents—depends on what happens inside a few addresses.

Those addresses are not 200 Lincoln Ave., Santa Fe City Hall, or 201 W. Marcy St., the new Santa Fe Convention Center.

They are 85 Broad St. in New York City, the towering home of Goldman Sachs, and 1155 21st St., NW Washington, DC, the solid red square that houses the US Commodity Futures Trading Commission.

That’s because the mayor and city councilors can’t do much about the price of gasoline. But traders and federal regulators do have a say. The price of gas matters because most tourists who come to Santa Fe—dropping cash in the hotels, restaurants and markets that employ thousands of locals—get here in cars.

And energy analysts say the price of gas has less to do with what happens on Nigerian oil rigs than with the bets of speculators on oil futures markets. Such speculators now buy more fuel than those who actually burn it, like trucking companies. Speculators drove last year’s record $4-per-gallon gas price spike, which blew many summer travel plans to hell.

Fortunately, according to AAA New Mexico spokeswoman Sarah Schimmer, skyrocketing gas prices like last year’s are unlikely, thanks to lower global demand for oil. “As long as demand stays soft, and it has, even with the summer driving season coming on, we probably won’t see that spike,” Schimmer says.

That’s the good news. The bad news is, even if prices don’t hit last summer’s peaks, market speculation may keep gas prices high enough to deter recession-spooked Texans, Coloradans and Arizonans from filling their tanks and heading to Santa Fe.

Art Bouffard, president of the New Mexico Lodging Association, hopes the tourism industry will recover by autumn. For now, he says, the outlook is “dismal.”
“Consumers are leery about traveling. It’s not a good picture,” Bouffard says.

Historically, Bouffard says, gas prices above $3 per gallon would have a “dramatic” effect on people’s travel decisions. Given the recession, even this year’s lower per-gallon prices are not low enough.

Bouffard thinks gas prices would have to fall closer to between $1.98 and $2.05 per gallon to stimulate more travel. No one expects prices to go that low.

Earlier this month, the Energy Information Administration of the federal Department of Energy estimated regular gas prices would average $2.21 through September. The Rocky Mountain states that supply most of Santa Fe’s tourists are projected to have some of the nation’s highest gas prices this summer—approximately $2.30 a gallon, including taxes, in the peak tourist months of July and August.

As important as gas prices are, they aren’t the final word on tourism. Santa Fe Convention and Visitors Bureau Executive Director Keith Toler says the swine flu panic—which may rise again come fall—and the deadly drug war in Juárez, Mexico have deterred visitors to Santa Fe, 300 miles away.

“I don’t think they think [New Mexico is] the same as Mexico City, but it’s going to hurt us regardless,” Toler says.

La Posada General Manager Edward Towfighnia agrees. “Frankly, I think this whole swine flu scare has scared some customers, but little by little, as the news is leaving the front page, we’re getting back to normal,” he says.

There are other signs of a looming summer slump. Toler expects a 10 percent decline in hotel occupancy this summer compared to last. That’s above the break-even level for many hotels, but not enough to keep running at full steam.

In April, the last month for which figures are available, occupancy rates averaged 51 percent—a 9 percent drop from last April.

“That’s a dramatic drop,” Bouffard says. “Generally speaking, if you’re not doing somewhere in the mid- to high-50s, you’re probably not breaking even—or even coming close.”

There are bargains to be had, but people don’t seem to care, even with gas prices down. On average, Santa Fe hotels have lowered their daily rates by approximately $7, to about $106, since last year. Occupancy rates were even lower—around 45 percent in April—at the budget hotels on Cerrillos Road.

Even higher-end hotels and resorts are offering deals.

“We did not change the rate drastically, but we offer a lot of values. We’ve been offering packages where if you buy three days, you get one free; if you buy an advance purchase, you get a discount. We have an all-inclusive package, which is fairly unusual—it includes breakfast, lunch, dinner, tickets to museums and so forth,” Towfighnia says. “People are looking for bang for the buck these days.”

Tight times also are changing people’s habits.

“The thing we’re noticing [is] people don’t make advance plans. They wait till the last minute to make calls. Our booking window gets shorter and shorter and shorter,” Towfighnia says. “We go into the week thinking it’s going to be really horrible, and it turns out to be better than expected.”

Aside from such happy surprises, there are a few things the tourism industry can count on—like conventions.

The online calendar for the new convention center shows 41 events booked over the next couple of years. Most of those are local, like high school graduations and weddings. Only eight are out-of-town conventions and conferences booked for this summer, with 6,150 guests expected.

The biggest single event booked this summer at the new center is the Sculpture Objects & Functional Art Fair, June 11-14, which is coming to Santa Fe for the first time. SOFA press representative Barbara Smythe-Jones says 8,000 people could attend, but that’s probably optimistic. The CVB expects 2,000.

And what of the annual Santa Fe Indian Market, which state Deputy Tourism Secretary Jennifer Hoffman calls “one of the jewels in the crown of tourism in Santa Fe”? “We’re being optimistic,” Indian Market spokesman Gabe Gomez (a former SFR writer) says, citing ticket sales for pre-market gala events and artists’ applications. “Maybe it’s foolish, but like I said, we don’t anticipate a big hit.”

If the CVB’s estimates hold true, the average business traveler to Santa Fe spends $2,120 during a trip here, including approximately $216 a day on shopping and food. Such spending, over and above lodging costs, provides most of the “trickle-down” that keeps locals afloat.

With fewer guests, hotel operators are “trying to reduce their expenses, and one way to do that is reduce the amount of labor they have. Usually about this time of year, they’re in the process of hiring additional people. There is some hiring, but it’s not as great as it might normally be,” Bouffard says.

Approximately 8,800 Santa Feans are employed in “leisure and hospitality,” according to the state Department of Workforce Solutions—about half as many as work in government, but 10 times as many as work in manufacturing. Fewer hospitality jobs mean less money flowing through the economy—and a smaller budget for government services like police and schools.

“There won’t be as much buying power. That’ll impact gross receipts [taxes, which fund local government]. It’ll impact lodgers taxes that are used to attract more visitors,” Bouffard says. “You will see some properties up for sale. Your larger properties, the ones that have regional or national headquarters, they can afford to hold on. It’s the small guy that’s going to be hurting the most.”